Why I Only Hire W-2 Therapists (W-2 vs. 1099 part 3)

I've noticed that private practice therapist tend to hire additional therapists as 1099 contract employees. Reasons frequently cited for choosing to hire therapists as 1099 employees is that they don't have to pay the therapists taxes. While it may be more "affordable" to hire therapists as contractors, in my experience, there are also "costs." (For an summary of the difference between W-2 and 1099 employees read part 1 in this series. To hear about my employment tax audit adventure read part 2.)

According to the IRS website, the general rule for classifying 1099 independent contractor is "if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done" (italics added). It also states that an employee is not a contract employee if the services "can be controlled by an employer (what will be done and how it will be done)" and if "the employer has the legal right to control the details of how the services are performed."

In consulting with therapists around the U.S. I've heard about some of the "costs" of hiring 1099 employees. Some of the costs high turnover rates due to the part-time and often temporary nature of contract employee relationships. Some of those "costs" include lack of control over how and where therapy is done, inability to require specific paperwork, inability to require attendance at staff meetings or trainings, inability to request that therapists network and participate in community outreach to boost referrals.

Here are the four main reasons I only hire therapists as W-2 employees:

1) Overall Cohesiveness

My vision for Wasatch Family Therapy has always been to build a cohesive team with a shared long-term vision of providing excellent clinical services to clients across the lifespan from an attachment perspective, not just have a group of therapist doing any kind of therapy they choose.  Now that we have grown into a clinic of 18 therapists at 3 locations cohesiveness is even more crucial. When therapists are hired as 1099 contractors employers are not supposed to tell the contract worker how to do therapy, or make other specific requirements of the worker, such attendance at trainings.

2) Higher Level of Quality Control

If a therapist is going to work under my name and my practice name or "brand", I want to be able to have a say in how, where, and when they do the work.  I've spend over 10 years building trust, credibility, and presence in my region and I want to be able to be able provide mentoring, direction, and training in how my clinical team provides services.

3) Ability to Require Certain Activities

I want to be able to require certain activities from my team members that hiring them as 1099 workers does not allow me to do. We have streamlined forms for notes and documentation in our EHR system. I require each therapist to engage in at least one outreach or networking activity each month in order to create strong referral sources. I require attendance at two monthly staff meetings, and a certain level of professional appearance at the office.

4) Implication of Long-Term Relationship

I am not interested in hiring temporary therapists to provide services. Hiring 1099 workers generally implies a short-term relationship. I am interested in hiring therapists who have a shared vision and who I can invest in long-term, and who will invest in building the practice long-term. I want to build mutually beneficial relationships not just provide services. Hiring therapists as W-2 employees shows a greater long-term commitment to them to build their practice for the long haul. I also allows me to expect a greater commitment from them.

Would Your Practice Survive An Employment Tax Audit? (1099 vs. W-2 part 2)

Does the state tax commission really take the time to audit small private practices? I didn't think so, until my practice was selected for an audit.

A few years ago my clinic was selected for an employment tax audit. Lucky me, right? When the auditor walked into my office suite and saw many offices with different names on the doors, he looked at me pleadingly and said, "Please, please don't tell me that these therapists are all classified as 1099 contractors."

I replied, "I won't. We're all W-2's."

There was a look of relief on his face.He then proceeded to tell me that health and mental health private practitioners are notorious for incorrectly classifying 1099 employees. In his experience many groups are set up as contract workers when they are acting like employees (I'll go over into detail about the the IRS criteria for how to classify  an employee as a 1099 vs. W2 employees in a forthcoming post).

The auditor requested access to all of my financial documents including bank accounts, accounting,  payroll information and tax documents. He asked us questions about any large checks written directly to employees to make sure we were paying our employment taxes. After a brief review of my payroll and tax documents the auditor thanked me for making his job easier and left with a smile. I breathed a huge sigh of relief.

Had I hired the therapists working with me as 1099 I may have been penalized with a hefty fine and required to pay back employment taxes on all of the therapists' income. I was not in a position to shell out thousands and thousands of dollars. Had I been incorrectly classifying employees it may have put my practice in jeopardy.

Do you know the IRS criteria for classifying 1099 contract workers vs. W-2 employees? It isn't based on whether or not you want to pay your therapist's taxes or want to have them pay self-employment taxes. It isn't based on whether they are full-time or part-time workers. It isn't based on whether or not you provide benefits.

There are many misconceptions about classifying employees in private practice. I'll address theses criteria for how to distinguish between hiring 1099 vs. W-2 therapists in upcoming posts.

Watch for the next Therapist Blog Challenge coming next week, too!

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Adventures In Private Practice: Psychotherapist and Art Therapist Amy Tatsumi, LPC

Tell me a little about your practice... I am a board certified art therapist, licensed professional counselor and psychotherapist in Washington, DC. I see clients across the lifespan and specialize in working with Women Who Do Too Much.  I also see therapists in training and provide post graduate and post license supervision.  Through the creative process and talking, clients learn to connect their hearts and minds to live more wholeheartedly.

Why did you decide to open a private practice? 

I had a small private practice for a number of years while also working a full time job in public mental health.  After having my daughter and living in Japan for some time last year, I new that I needed a better work life balance.  In the summer of 2012, I decided to take the leap and step into the arena.  My mantra continues to be that things are happening in the right time and right way for my business.

Clients that therapists find to be the most “difficult” are sometimes the ones who can teach them the most. What have you learned from your toughest clients?

Some of the most challenging clients that I worked with were very angry and rightly so.  Underneath the anger was deep shame and fear.  This story  from Pema Chodron is one of the most special gifts those clients taught me: How To Defeat Fear: Once there was a young warrior. Her teacher told her that she had to do battle with fear. She didn’t want to do that. It seemed too aggressive; it was scary; it seemed unfriendly. But the teacher said she had to do it and gave instructions for the battle. The day arrived. The student warrior stood on one side, and fear stood on the other. The warrior was feeling very small, and fear was looking big and wrathful. The young warrior roused herself and went toward fear, prostrated three times, and asked, “May I have permission to go into battle with you?” Fear said, “Thank you for showing me so much respect that you ask permission.” Then the young warrior said, “How can I defeat you?” Fear replied, “My weapons are that I talk fast, and I get very close to your face. Then you get completely unnerved, and you do whatever I say. If you don’t do what I tell you, I have no power. You can listen to me, and you can have respect for me. You can even be convinced by me. But if you don’t do what I say, I have no power.”

What's your biggest pet peeve about private practice?

As with any new business, I would say mine is the growing pains.  I work in a heavily saturated mental health provider community.  I believe that there are enough clients for every provider.  Focusing on  building relationships in the community has been helpful to counterbalance the growing pains.

How did you discover or develop your practice “niche”?

I know that many women are caught in many double binds and in the never enough culture.  Whether you a 20 something, single woman, a divorced working mother, a stay at home mother, a widow, or another woman in transition, I know that many women use people pleasing, perfectionism, numbing, and performing as a means of connecting, navigating relationships and settings, and as a guidepost for self worth.  In my practice, women learn to use their own heart~body~mind wisdom to meet and respond to destructive covert messages and to life's patterns and challenges, as well as value themselves and their thoughts, feelings and opinions.

In 2012, I started Dr. Brene Brown's Connections Certification process and provide a variety of related offerings.  The offering are especially supportive for adults and teenagers who feel stuck, unworthy, and never good enough and those who struggle with perfectionism.

What resource (book, website, person) helped you the most when setting up your private practice?

Relationships with individuals and communities have really been the foundation for this start up phase of my private practice.  In Washington, DC, Jennifer Kogan started a network "DC Therapists Moms" for parents and people who would like to have children who are in the mental health profession.  It is truly a supportive and thoughtful community with over 400 members.  On Facebook, Julie Hanks's group, "Private Practice Toolbox" has be helpful for national and international brainstorming and information sharing.  Lynn Grodzki's book, 12 Months to Your Ideal Private Practice: A Workbook is a book that I cannot recommend enough.  It has practical and creative strategies to strengthen your practice from all perspectives.  Derek Halpern's blog : Social Triggers is direct and effective too.

What has surprised you most about being in private practice?

In the public mental health community, I had strong relationships, but my area of expertise for almost 10 years was in trauma and attachment.  In private practice, I have had start the relationship building process again, especially with securing referral sources. I have been filled with gratitude for my initial referral and cross referral sources.

Has your private practice helped you grow professionally?

Being a small business owner has reconnected me with parts of myself that I never knew.  At each point of developing my practice, I am having to acquire new skills from social media marketing to the business side of the practice to going through Dr. Brene Brown's Connections Certification process.

Has it helped you grow personally, too?

Finding the work life balance has been really been wonderful.  I am more present in my relationships and have more time for myself.  It takes work, but it is well worth it.

Being a therapist can be emotionally exhausting. What do you do to care for your own emotional and psychological health?

Finding time to just be is really restorative for me. Being an art therapist, I do try to make art regularly.  The creative process is centering for me.  Yoga Nidra is a form of meditation that I use.  I also love to be in nature, cook, practice yoga, and enjoy time with my family and friends.

How do you cope with the inevitable stressors involved with being your own boss? 

I remember that failure is a necessary part of the creative and learning processes.  I see the failures as bumps in the road and try not to get stuck there.  People rarely get it right on the first try.  To find the best solution, one must keep trying with new approaches and strategies.

What personal strengths have helped you succeed in private practice? 

I believe in this work from a very core place.  I have witnessed so many lives changed, perspectives shift and relationships repaired and healed.  Staying grounded in the why I do this work keeps me in focused.

For more information on Amy's practice visit tatsumiandjones.com Join my Toolbox 2013 Therapist Blog Challenge and strengthen your online presence!